In recent years, prop firms have significantly impacted the retail trading industry. These firms have opened doors for talented traders with limited capital, allowing them to earn a living through profitable trading without needing decades of compounding small initial investments. However, due to the extensive marketing efforts of these prop firms, it has become increasingly challenging to distinguish between exaggerations and actual achievements attainable through trading.
This article explores the process of making money using Forex prop firms and strategies to maximize profits from funded trading accounts.
Using Prop Firms to Make Money
Making money using an online prop firm follows a relatively straightforward process, although it is not easy. You must undergo a trading challenge when you join an online prop firm. This challenge is designed to eliminate unprofitable traders to ensure that trading capital is allocated only to those who can generate consistent profits. You will receive login credentials for a funded trading account if you pass the challenge.
The firm finances the account, and although you cannot directly deposit, withdraw, or transfer funds, the capital provided is considered “yours” for trading purposes. Each prop firm has its own set of rules and profit-sharing percentages.
For example, a 75% profit split means you get to keep 75% of the profits generated through trading with your funded account, provided you adhere to the firm’s rules. The remaining 25% returns to the firm as compensation for supplying the capital.
Maximizing Profits Using a Firm
Traders wanting to increase their earnings using prop firm trading have three primary options to consider. Let’s explore these options:
Capital scaling is your most powerful tool. However, it’s crucial to collaborate with a firm offering this feature, as not all new prop firms provide it. Capital scaling is a simple concept. The prop firm increases your trading capital when you achieve specific profit milestones.
Some trading firms double traders’ trading capital when they make a 10% profit. This reflects their growing trust in the trader’s abilities and allows the firm to earn higher profit splits as they manage more money. If your funded account lacks capital scaling, it’s recommended to consider a prop firm that offers this option.
Compound interest is a marvelous phenomenon in the realm of investing. Similar to compounding your personal trading capital, most funded accounts allow you to do the same. This approach increases the capital in your trading account with the firm but comes with its fair share of risks.
If you’re using a shiny new prop firm without a physical presence, be cautious of the risk associated with them vanishing along with your trading profits. In this regard, it’s generally advisable to withdraw all profits whenever possible for safety.
Multiple Prop Firm Accounts
Having multiple funded accounts simultaneously is another excellent option. Although maximum limits are set on the number of accounts a firm allows you to have, this limit is typically quite high. The idea here is to use multiple trading accounts and the same types of setups.
You should maintain similar risk profiles or adjust them slightly to assume higher or lower risk. Managing multiple trading accounts and swiftly logging in and out is challenging, particularly for intraday traders.
Profitable traders can indeed make money using funded accounts with prop forex accounts. How much money you will make depends on various factors, including your profitability, the prop firm you’re associated with, the capital under your management, the profit split arrangement, and the percentage returns you achieve in a given month.